Hard Truths about Health Care

Republicans have vowed to go back to the drawing board to draft
a new Obamacare repeal-and-replacement bill. Meanwhile President
Trump is threatening to work with Democrats to come up with a
health-care plan — or maybe to simply let Obamacare crash and
burn.

But whoever eventually comes up with a replacement for the
Affordable Care Act should keep a few hard truths in mind.

1. Health care is neither a right nor a privilege; it’s a
commodity. Worse, it’s a finite commodity. There are only so many
doctors, so many hospitals, and so much money, and there are limits
to how much these things can be expanded. That’s why no health-care
system, outside Bernie Sanders’s fantasies, provides unlimited care
to everyone.

Every health-care system in the world rations care in some way,
either through bureaucratic fiat (Scandinavia, the U.K.), waiting
lists (Canada), or price (that’s us). One can argue about which of
these rationing mechanisms is fairest or most efficient, but let’s
not pretend that it won’t occur.

Republicans would be well
advised to stop trying to win a popularity contest and simply do
what’s right.

2. Coverage is not access. Democrats like to pretend that giving
everyone a piece of paper called insurance guarantees them access
to the care they need. It’s sort of like magic. Say the right
words, and poof, medical care appears. But in the real world it
doesn’t work that way.

For example, take Medicaid, which is responsible for more than
half the increase in coverage under Obamacare. Nearly a third of
primary-care physicians won’t accept Medicaid patients. And when
doctors do see Medicaid patients, they tend to be slower in
granting appointments. Moreover, for the working poor, seeing
doctors during normal office hours can be problematic. Perhaps
that’s why Medicaid patients continue to use emergency rooms for
routine care at a disproportionate rate. Numerous studies show that
health outcomes for Medicaid patients are little better than those
for the uninsured. In fact, some studies show patients faring worse
under Medicaid than if they had no insurance at all.

Similarly, if Obamacare forced your insurance carrier to cut
back its provider network, your shiny new coverage may no longer
include the physician of your choice. And the incentive structure
of Obamacare, notably its pre-existing-condition rules, encourage
insurers to drop coverage for top doctors and hospital centers of
excellence.

3. The uninsurable are uninsurable. Let us remember that the
definition of “pre-existing condition” is: someone who is already
sick. It’s a little like driving your car into a tree and then
trying to retroactively buy auto insurance. It won’t work.
Insurance is the business of spreading risk. But for someone who,
say, has cancer, there’s no risk to spread, just cost. That’s not
insurance, it’s paying for health care.

Obamacare tried to square this circle by mandating that young
and healthy people buy insurance to offset the cost of providing
care to those already sick. It turns out that didn’t work. Not
enough healthy people signed up to pay for the influx of sick
people. Insurance companies either dropped out of the market, cut
back on high-quality providers, or raised premiums. All of this
forced more healthy people out of the insurance pool and threatened
an adverse-selection death spiral.

Republican proposals to keep the popular pre-existing-condition
protections while jettisoning the mandate for coverage is only
going to make the adverse-selection problem worse. It may have
sounded like a moderate compromise, but it is like trying to be a
little bit pregnant. It’s not going to work. The only realistic
approach to dealing with pre-existing conditions is to take those
people out of the insurance pool altogether and somehow pay for
their care directly. There are several options for doing so, from
state insurance pools to a revamped Medicaid program.

4. Medicare is not a success. Faced with the wreckage of
Obamacare, Democrats are increasingly embracing the once
controversial idea of “Medicare for all.” Most of them would start
slowly, with a Trojan-horse “public option,” a taxpayer-subsidized
plan that would undercut private insurance, but the result would
still be a government-run national health-care plan based on
Medicare.

Medicare is undoubtedly popular, especially with its
beneficiaries. It should be. The average two-earner couple pays
about $150,000 over their lifetime in Medicare taxes and premiums,
while collecting almost $450,000 in benefits. Jackpot! But that
disparity is one of the reasons why Medicare is running some $58
trillion in the red, after totaling all projected future
liabilities. A program facing more long-term debt than most
countries probably isn’t begging to be expanded.

Moreover, almost everything that people complain about with our
health-care system is even more evident in Medicare. Medicare is
inefficient, spending lots of money without evidence of better
results. According to the landmark Dartmouth Atlas study, the
counties with the highest per-patient Medicare costs showed no
better outcomes than low-spending areas. Medicare over-covers
routine care but stops covering you if you get really sick. It is
based on an old-fashioned “fee for service” payment protocol that
rewards inputs, not quality. And, its bureaucratic price controls
under-reimburse doctors, shifting costs to private insurance plans,
or discouraging doctors from seeing Medicare patients. About 15
percent of doctors don’t accept Medicare, and as many as a third
limit the number of Medicare patients that they will treat.

5. No, we didn’t have a “free market” health-care system before
Obamacare. Suggest free-market reforms to our health-care system
and critics will inevitably suggest that you want to go back to the
flawed system we had before Obamacare. But that system had little
to do with a free market. Nearly all health care was subsidized in
some way, either directly or indirectly. Actual health-care
consumers paid barely 13 cents out of each dollar spent on health
care, while the government directly paid for more than half of all
health-care spending. This third-party and even fourth-party
payment mechanism insulated consumers from the cost of their
health-care choices and drove up both spending and prices.

At the same time, provider cartels, both insurers and medical
professionals, used regulatory and licensing barriers to protect
themselves from competition and inflate prices. Other markets in
goods and services routinely produce lower prices and better
quality. Health care has always been different precisely because
free-market competition and consumer choice have been missing.

6. You are never going to make everyone happy. Obamacare is
unpopular. The GOP replacement was unpopular. Single-payer is
unpopular. In fact, one searches in vain for a health-care reform
that voters will love.

Americans want widely contradictory things from health-care
reform. They want the highest-quality care for everyone, with no
wait, from the doctor of their choice. And they want it as cheap as
possible, preferably for free. At the same time doctors, trial
lawyers, hospitals, insurers, pharmaceutical companies, and
government bureaucrats are all trying to protect their fiefdoms,
hold onto their gains, and shift costs to others. There is simply
no way to satisfy all these special interests and produce a
health-care plan that will be hugely popular.

Given this reality, Republicans would be well advised to stop
trying to win a popularity contest and simply do what’s right. They
need to repeal Obamacare down to the last comma and semicolon, then
replace it with true market-based reforms. Those plans are out
there. All it would take is for them to face up to a few hard
truths.